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tv   [untitled]    May 27, 2014 2:30am-3:01am PDT

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>> i really believe that all the arts have a serious function and that it helps us find out who we are in a much wider sense than we were before we experienced that work of art. ♪ >> good morning. the meeting will now come to order. this is the regularly scheduled meeting of the government audit and oversight committee. my name is supervisor london breed. i'm the chair of the committee. and to my right is supervisor katy tang and supervisor chiu will be joining us shortly. the clerk today is alisa miller.
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and i also want to thank sfgov-tv jesse larsen and jim smith. and, madam clerk, do we have any announcements? >> yes. please make sure to silence all phones and electronic devices. completed speaker cards and copies of any documents to be included as part of the file should be submitted to the clerk. items acted upon today will appear on the june 3rd board of supervisors agenda unless otherwise stated. >> okay. l can you please call the first item? >> item number 1 is a hearing to receive a report from the city's external auditors regarding their audit of the city's annual financial statements for fiscal year ending june 30, 2013, and their audit plan for the upcoming engagement for fiscal year ending june 30, 2014. >> okay. >> hi, good morning, supervisors. my name is carmen la frank. i'm the controller's office representative and i'll be introducing the two speakers. we have the director from the [speaker not understood] jany o'connell, [speaker not understood], she'll be doing the first present and then we have a presentation from [speaker not understood] from
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kpmg. this is part of the normal annual audit process and they report on their audit for the prior year and plans for the coming year and that's what they're doing today. >> thank you. >> hi, good morning, my name is annie, [speaker not understood] i'm [speaker not understood]. i have a powerpoint presentation -- i have a powerpoint presentation that i would like to present to you today. can you show that on the screen? thanks. i'm here to present three different reports to you today. the first report is the city's comprehensive annual financial report on what is otherwise known as the c-a-f-r. it's the city's basic financial statements. also to report on findings that we had from the audit and included in the report to the government audit and oversight committee. the third report that i'll go over today is the city's signal
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audit report and that is an audit of the city's expenditures. i do want to mention that the city's audit includes many different components and our audit by [speaker not understood] includes all of the city's funds except for the missing components being audited by kpmg which another person will [speaker not understood] today. for the comprehensive annual financial report we issued a modified opinion as is previously known as an unqualified opinion which is the highest level assurance that you can achieve under an audit. for the second report that i'll go over, there are certain required communications that we have to communicate to the governing body under auditing [speaker not understood]. i'll go over that in just a second. we also have one current one year recommendation from the audit relating to operation for the city. and i will also go over the prior year recommendation that
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we have in the previous audit and we came back to follow-up on their corrective action statuses. the third report is a single audit report. again, we issued an unmodified opinion which is the highest level assurance that you can achieve under an audit. we do have a current year recommendation relating to the city's federal awards. and again, i'll also go over the status of the prior year recommendation that we have from the previous single audit. if you would turn your attention to the report labeled report to the governing audit and oversight committee, on page 3 is where the required communication starts. these are typical communications that are required under audit [speaker not understood] and it includes any qualitative aspects of the city's accounting purpose that may not be presented in the c-a-f-r itself. i want to highlight that the
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city did implement four different accounting standards 2012-2013, however they did not have any significant changes to the city's financial statements. on page 4 is the listing of estimates that are included in the city's financial statements and it is also -- lists out how management had come up with those different estimates. page 7 is where the current year recommendation starts. during our audit we did identify one other matter which we delayed for improvement. during the fiscal year the city implemented a new payroll system called emerge peoplesoft and it consolidated the previous human resources as well as the different payroll processes that are used by the different departments. because of the conversion to the system we noticed a lot of
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policies and procedures used during fiscal year were based on the previous payroll system used. so, our recommendation is for the controller's office as the oversight department to issue new guidelines that are applicable to the emerge system and for the departments to follow those different guidelines. on page 9 starts the status of the prior year recommendations in the previous fiscal year audits we identified two different recommendations. the first one related to the successor agency of the redevelopment agency and the finding that we had identified was that due to the dissolution of the redevelopment agency, the accounting department for the agency needed additional help in terms of accounting and financial reporting functions. and, so, the corrective action that the city had implemented
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was to assign all contracts by the city to deputy director of finance and initiation to assist the sister agency in their accounting and financial reporting functions. so, we believe that the finding has been corrected and during fiscal year 2012-13 we did not see similar issues. >> do you actually have an extra copy of the report? i can't read it on my screen. >> yes. we have a copy issued ahead of time. >> the powerpoint? >> yes, the powerpoint and each of the reports. >> thank you. >> um-hm. the second, the second comment that he we had from the previous audit was an informational comment that related to a new pension accounting center and the [speaker not understood] system has to implement during the
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current fiscal year, fiscal year 13-14 and for the city as a whole the next fiscal year 2014-15. so, we wanted to bring that to your attention because it does require a lot of effort and planning ahead of time. the retirement system is required to implement the new accounting standards because it relates to its pension benefit in the current fiscal year 13-14, and we are currently working with the retirement system to make sure that they are on track with their project plan. that concludes my report on this particular report. the third report that i will present is a single audit report and it is an audit [speaker not understood] federal award and expenditures. like i mentioned earlier, -- as i mentioned earlier we issued an unmodified opinion on the single audit which is the highest level of assurance you can achieve.
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we did audit 16 major programs for fiscal year 2012-13 and that covered 15 different city departments. we do have one compliance finding that i will go over. we identified one particular finding for the aging cluster and this program was administered by the human services agency. there is a requirement for all city departments who pass this audit funding to a [speaker not understood] to identify the federal award information including the cfd number which is a unique identifying number for federal programs. and the communication had to happen at the time of the award by the time of the award, and during our audit we found that the information was communicated during the award but it was not communicated at the time of the award as required. >> communicated to whom specifically?
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>> to the recipient. to recipient, the grantees. >> thank you. >> so, we did identify that as the particular compliance finding and the department's corrective action plan is to include that information going forward at the time of the award to the [inaudible]. that is the only recurring finding that we have. we had three prior year findings as it related to your single audit. the first one was [speaker not understood] for two different hiv programs. the finding was that the advance number different identifying number for federal award was not obtained from [speaker not understood] or the grantee as required by the award and also the monitoring, the [speaker not understood] monitoring required by -- for the city department was not performed for one out of nine of the recipients that we had
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tested. so, this year we went back and we were able to perform procedures to set aside that the government had implemented their corrective action plans for the current fiscal year. the second prior year finding related to indirect costs for the eecbg program that was administered by the department of the environment and the finding was that the department had used a proposed indirect cost rate when it claimed reimbursement of federal awards instead of the one that was approved by the federal department. and this year, again, we went back and we were able to perform procedures to confirm that the department had corrected the finding. the third and last prior year comment related to reporting internal controls over reporting for the homeless security plan program and this program was administered by the department of emergency management. our comment was that when we looked at internal controls we
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identified the required function was [speaker not understood] by one individual. there was no review and oversight. so our recommendation was to implement that particular function. and the department has assigned another manager to do secondary reviews for those reporting functions. and, so, that concludes my report on the fiscal year 2012-13 audit report. do you have any questions before i move on? >> no. thank you. >> so, the last report that i would like to present today is an audit plan for this coming year audit which is the 12 and 13, 14 audit service plan. again, our scope is for all city funds except for the health services system airport, the separate utilities commission, the mta, the multi-corporation which are audited by other auditors. [speaker not understood] i would like to highlight a
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couple of sections for your information. on page 5 is our audit timeline and this identifies when we will start the audit for fiscal year 2013-2014 and some of the key dates as well as when we plan to report back to the gao -- >> which in particular? >> of the audit service plan it's -- >> of the documents we've been provided with? >> right, it should be in your packet. >> got it. >> so, we are starting our audit for the 2013-14 fiscal year now. we are doing our planning procedures. we'll come out and do [speaker not understood] testing [speaker not understood] at the year-end kloza round september, october and we target [speaker not understood] all the different components by
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october-november and the city single audit, the audit of the city's federal awards will complete -- they will be completed by next february, march time frame. so, we are targeting to report back on the fiscal year 13-14 audit result in april of 2015 back to the board or the committee. >> thank you. i just have one general comment. in particular, one of the challenges with audits, in particular with the departments, you have the departments which have or typically fully staffed. they have resources and the ability to dedicate those resources to providing the controller's office with information in a timely manner to deal with responding to these particular audits. but i do think that there are some challenges in term of the timing as it relates to subcontractors or subgrantees or other entities that receive especially grant awards and the
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ability to provide sufficient, i guess, feedback within a timely manner. and, so, i just wanted to make that point and ask that you look into ensuring that you provide especially subgrantees sufficient time to review and to respond, if necessary, to these particular audits. >> right. like i said, we are starting our planning now. all the departments and programs that are audited this year [speaker not understood] as they relate to the recipients, our auditing standards -- our auditing procedures are [speaker not understood] the record. so, there is limited interaction with the subrecipients itself. i think you may be referring to the city's own monitoring procedures for the subrecipients which are rehe inquired procedures but i will make note of your comment. >> yes, thank you. >> thank you. the next section in the audit plan that i would like to highlight is on page 7.
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this is an overview of our audit process and in here we've identified some of the more critical audit areas that we will focus on. to the right of page 7 is where all the critical audit areas start. and one of the very key or two of the very key audit areas this year is the implementation of two new accounting standards. one is [speaker not understood] 65. with this particular statement does is it created two new financial categories. in the past it was access liabilities in that position. this particular statement added two new categories on how certain financial finance will be presented in certain financial statements. so, that will be a change in next year's financial statements. you'll see some new line item. the second thing i'd like to mentioned earlier is the new financial accounting benefit center pension benefit. the retirement system is
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required to implement those standards in the current fiscal year. and the city will implement the standards in the next fiscal year. so, that will be a pretty significant change in terms of the financial statements. the last section starts on page 11, section 5. this starts out our responsibilities as auditors as well as management's responsibilities in taking responsibility for the financial statements themselves. and with that, that concludes my presentation on the audit service plan. do you have any questions? >> just, can you please provide an electronic copy of the sers plan so we can up load those for the benefit of the public? >> yes. >> thank you. all right. >> madam chair, supervisor tang, monique zamuda from the
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controller's office. i did want to comment on the audit process for the city as well as some of the findings that were stated about the payroll processes for the city. it really takes a village to complete the audit work on an annual basis. we have scores of people within the controller's office and all the financial departments pulling together the schedules and reconciling all the balances and so on and we're very pleased to report that the external audit by [speaker not understood] did come out very, very well. it was very clean audit, very, very few areas of concern. and more importantly those areas that were identified last year, particularly with the dissolution of the redevelopment agency, all of those have been corrected and for an ongoing basis. so, we're very happy about that.
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as you know, we have a new h.r. and payroll system that was implemented in august of 2012. so, the audit period does include that transition period and the auditors did recommend that policies be developed and updated to reflect the new systems. we were in the process of creating those policies and that manual when the audit occurred and that has since been completed. all of the departments received copies of the manual that identify all the steps that need to be taken to ensure internal controls that everybody is being paid correctly and timely. we have a user group that meets on a monthly basis to go over all of the procedures. we have reports that compare what has been paid to what we expect to be paid, and we do think that the new payroll system is providing us with very timely and accurate payroll. we he in this fiscal period are also developing manuals for
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departments so that they have a cookbook as to how to ensure that the payroll is done accurately. and, so, we will be reporting on that to you next year. and then i'm also here to answer any questions you might have about the auditing process. >> thank you. >> madam chair, i just wanted to point out that all of the documentations have been up loaded to the file but it will be included with the minutes. they're online. >> okay, because i can't pull them up under the line item. did that just happen? >> yeah, when they turned them in earlier this week, they did. if you go under the lrc, they're all updated. >> okay, thank you. >> hi, supervisors. one more time. a very brief presentation by kpmg. they had no audit findings in their audits. so, this will just be the presentation of their coming year.
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she's loading that right now. >> thank you, good morning. my name is jamie cabin and i'm the senior manager with kpmg here to report the 2014 audit plan for kpmg. you have a brief agenda to go through all the topics that we will address today. first we have the audit engagement teams. overall, we have good continuity this year with
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returning members and several returning team members all the way down to the associate level. we first have the not gaugement audit partner nancy rose who is the responsible partner over all the entities that we have been assigned to and engaged for. thank you. we set a [speaker not understood] and myself are the senior managers responsible for these audits as you see allocated below. we also have brock romano and kenneth dee on as our current review partners. ~ the objective of the audit is to express an opinion as to whether the financial statements prepared by management are fairly presented in conformity with the generally accepted accounting principle standards and the government auditing standards. we perform the audit to provide reasonable but not absolute assurance that the financials of material statement whether that is from error or fraud,
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and design our controls specifically over the risk -- inherent risk, counseling processes to obtain sufficient support for our controller's assessments. [speaker not understood] responsibilities of management of each of the departments. i won't go through these in all detail. just to highlight a couple here. of course to fairly present the family statements in conformance with the generally accepted accounting principles, identifying and confirming that the city complies with laws, regulations applicable to the activities, and establishing and maintaining internal controls to prevent, deter and detect fraud. we will of course require that management make representations to us during the audit and at the end of the audit not limited to the two bullets you see here in regard to disclosure of significant deficiencies, including
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materially, it says that in regards to the design and operation to ensure that [speaker not understood] the city's ability to properly report financial data and management to acknowledge their responsibility of the design and implementation of the programs and controls to prevent and detect fraud. the audit committee is responsible for or other known as though in charge of governance. it's for the oversight of the financial reporting process and the internal controls over the financial reporting process. and we obviously disclose here at the bottom the audited financial statements does not relieve the committee or management of their responsibility. in regards to responsibilitieses of kpmg, the first two bullets i indicated in previous slides to continue on we evaluate whether control are sufficiently addressed. those specific to material misstatements due to fraud and the risk of management
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overriding controls. we will communicate to management and those with governance all significant deficiencies and material weaknesses and internal controls and, of course, perform our audit in accordance with professional standards and standard applicable to government auditing standards. and we will also communicate all required information including significant matters to management and audit committee. in regards to other information and documents containing audited financial statements, our report does not extend to this other information and documents containing -- documents containing audited financial statements. in these situations the documents, these would be subject statistical information, financial trends, demographics or operating results. would he require us to read through that other information and identify if there is a material inconsistency with the audited financial statements.
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if there are any identified material inconsistencies, those need to be resolved in order for us to be able to leave and attach our report in. and if not we would be required to modify or withhold our report from this other information document. our audit plan. here is a list of the scope of work of those departments, financial audits, agreed upon procedures, and examinations that kpmg is responsible for reporting and testing to, and of course here is the applicable financial reporting framework. as i mentioned earlier, that we will follow. in regard to results from prior year in all of these, they are consistent reports with prior year and as carmen indicated, we had a modified opinions and it no significant material deficiencies to report.
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we also like to disclose in our audit plan presentation public offerings and any instances of which the city may have an offering of exempt securities. in these situations, much as i indicated before, we would be required to perform procedures as were required by the applicable standards and this would also consist of subsequent event procedures in order to be engaged and perform those services. we will not perform procedures to corroborate other information and this would be consistent with the reporting on projections. in regards to our audit timeline and key dates, planning and infill work for the 2014 audit has started here in the month of may and will continue through to august 2014 here. our final fieldwork will begin
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in september and it will go through january 2015. that's specific to the single audit. deliverables are targeted financial statement issuance date is october 24th and our issuance of significant deficiencies report if applicable under the statement of auditing standards 115 will be reported on october 24th as well. the issuance of our responsible single audits and other special reports will be before january 31st, 2015. and finally, we do confirm and report to this committee our independence in regards and rehe expect to the city and county of san francisco. and that concludes our presentation. >> thank you. >> thank you. >> okay. >> thank you, supervisors. that concludes the presentation. >> thank you. are there any questions, colleagues? any members of the public want to testify on this item today?
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seeing none, public comment is closed. [gavel] >> okay. do i have a motion to continue this item to the call of the chair? >> so moved. >> okay. thank you. without objection this item is continued to the call of the chair. [gavel] >> madam clerk, can you actually call item number 3, please? >> item number 3 is an ordinance amending the campaign and government conduct code to expand the definition of a lobbyist; expand the definition of an officer of the city and county; expand the list of reportable lobbying contacts; hold employers and clients of lobbyists jointly and severally liable for violations of this ordinance committed by the lobbyist on behalf of that employer or client; enhance lobbyist training, auditing, and record-keeping requirements; require public reports about city officials who fail to file statements of economic interest; require a public guide to local campaign finance laws; require permit consultants to register with the ethics commission and file regular disclosure reports; and require major developers to disclose donations to nonprofits active in the city. ~ donations. >> supervisor chiu? >> thank you, madam chair. thank you, colleagues. i want to thank the members of the public who have worked with my office on this legislation. and after many months of work i do hope that we can move forward with some reform of ethics and lobbying laws on to our colleagues at the full board. before i go over the changes that we have made to the ordinance in recent months, i want to take a moment to first thank our city attorney dennis
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herrera for his dogged work on this legislation and congratulate him and his office for recently securing the largest municipal legal settlement of lobbyist enforcement action recently. he has shown we can enforce our lobbying laws. i also want to take a moment and thank the extensive work of his very able deputy city attorneys, joshua white, andrew chin, lee, jon givner, and alley fisher who have been working with my office on these issues for quite sometime. in recent months my office has heard from nonprofit leaders, attorneys, ethics advocates, permit expediters and many others and again i want to thank you for the extensive input you have all helped to improve our legislation. and finally, i want to be clear that there are several proposals that i have not included in this ordinance that we are definitely continuing to contemplate and i fully expect them to be revisited in the future. as i said at our last hearing on this topic a couple of months ago, our city